In its analysis of the recent funding crisis in Turkish capital markets, the British magazine The Economist wrote that the picture created by some investment funds and finance companies that have declared extraordinary returns over the years has reversed sharply.
The magazine stated that the process that started with some funds not being able to meet the withdrawal requests from investors turned into a huge sales wave in Borsa Istanbul. According to The Economist, while the main index fell by more than 5 percent on September 16, the scandal caused approximately $30 billion in value to be erased from the market in two days.
Reuters also reported that BIST 100 completed the week in question with a loss of over 8 percent, which was the worst weekly performance since March 2025.
RETURNS EXCEEDING 60 THOUSAND PERCENT
In the background of what happened, The Economist drew attention to the extraordinary increases recorded in recent years.
According to the magazine, one of Tera's leading funds rose more than 60 thousand percent in just three years. Destek Finans Faktoring, on the other hand, became Türkiye's second largest public company in terms of market value, with its shares gaining approximately 7 thousand percent in value only 17 months after its public offering.
However, after the rise, the situation reversed. First Tera and some other portfolio management companies had difficulty meeting the demands of investors who wanted to convert their investments into cash.
Then details began to emerge of the structures allegedly run by some companies, which one official described to The Economist as “Ponzi-like.”
131 FUNDS ARE BEING LIQUIDATED
Following the developments, the Capital Markets Board (CMB) made a comprehensive intervention into the funds of seven portfolio management companies.
The number of funds under liquidation increased to 131. According to CMB data, 455 thousand 758 unique investors have shares in these funds. The total size of the funds is approximately 18 billion dollars.
Türkiye İş Bankası was appointed to liquidate the funds of Tera Portföy, and Ziraat Bank was appointed to liquidate the funds of A1 Capital, Atlas, Bulls, Hedef, Pardus and Pusula Portföy. The liquidation process is expected to be completed within three months unless extended by the CMB.
While some executives were arrested within the scope of the investigations, international travel bans and asset measures were imposed on dozens of people.
"WARNING SIGNS HAD EMERGED BEFORE"
The Economist argued that the crisis did not appear suddenly.
According to the magazine, Minister of Treasury and Finance Mehmet Şimşek had drawn attention to the problems regarding some transactions in the stock market since last year and announced that new regulations would come.
Meanwhile, it was stated that there were increasing findings that some funds were purchasing shares with low free float and limited trading volume, or even shares in their own subsidiaries.
According to the mechanism described in the magazine, when the prices of shares increased due to intensive purchases, the funds could declare high returns, these returns could attract new investors, and new borrowings could be made by using the appreciated shares as collateral.
Evaluations reported by Reuters also indicate that funds concentrated in stocks with low liquidity and low free float are at the center of the crisis. As investors' demands for exit increased, funds sold more liquid assets to create cash, increasing the pressure on the market.
CRITICAL WARNING FOR Türkiye FROM MSCI
The Economist also reminded us of international index provider MSCI's warning regarding the Turkish market in June.
According to the magazine, if the necessary regulatory steps are not taken, there may be a risk that Türkiye will be relegated from the "emerging market" status to the "frontier market" category.
Reuters also reported that both MSCI and FTSE Russell expressed concerns about transparency and accessibility in the Turkish market.
"REGULATORS MOVED SLOWLY"
The Economist devoted one of the harshest sections of its analysis to regulators.
The magazine argued that authorities did not respond quickly enough to the warning signs that emerged. Stating that the CMB only introduced regulations at the end of August to prevent funds from excessively concentrating on the shares of certain companies, the magazine wrote that fund managers started selling their shares in order to comply with the new rules, which brought down the prices.
It was stated that after the declines, investors' demands for exit from the funds accelerated, and some funds could not meet these demands.
ŞİMŞEK: NO SYSTEMIC RISK
Minister of Treasury and Finance Mehmet Şimşek argued that the crisis did not spread throughout the market.
In his statement on September 18, Şimşek stated that what happened was due to the credit and liquidity problem that emerged in a limited number of funds and said, "There is no widespread systemic risk." The Minister said that approximately 90 percent of the fund market continues to operate healthily.
The Economist also reported that foreign investors have made a similar assessment for now. Aberdeen portfolio manager Viktor Szabo said that what happened did not spread across the economy.
According to the magazine, fears that investors were heavily diverting money from the stock market to foreign currency did not come true; It is estimated that a significant portion of the money is directed to high-interest TL deposit accounts.
"WILD WEST" SIMILAR
Despite this, The Economist evaluated that the crisis damaged the international reputation of Türkiye's capital markets.
Reminding that President Recep Tayyip Erdoğan has highlighted his goal of making Istanbul a global financial center in recent years, the magazine argued that the funding crisis could have negative consequences for this goal.
While evaluating foreign investors' perception of the Turkish stock market to The Economist, Timothy Ash from RBC BlueBay Asset Management described the market as a "Wild West" analogy.
Ash said that after what happened, trust in the regulatory environment will be questioned.
"ARRESTING MANAGERS MAY NOT BE ENOUGH"
The Economist reported that analysts are of the opinion that judicial proceedings against suspicious fund managers alone may not be sufficient.
The analysis argued that it should be investigated why regulatory authorities did not intervene sooner. The magazine also suggested that allegations that some portfolio managers benefited from political protection should be examined. The Economist wrote that an investigation into these allegations does not appear to be on the agenda. This section consists of the claims and evaluations conveyed by the magazine; It does not constitute a judicial decision.
"HIGH INFLATION PUSHED INVESTORS TO THE STOCK EXCHANGE"
The analysis also drew attention to the broader economic picture behind the crisis.
It was stated that inflation in Türkiye will exceed 80 percent in 2022 and remain high in the following years, leading savers to look for alternative investment instruments that can protect the value of their money.
According to The Economist, the expectation of high returns has caused many small investors who do not have sufficient experience in financial markets to turn to highly volatile stocks and funds.
The magazine concluded its analysis with a striking warning: Stating that investors in Türkiye have become accustomed to the constant rise in prices due to high inflation, The Economist emphasized that share prices can move in both directions.
